"This Has Wrecked My Career"

For much of his 36 years, suspected racketeer and former Arizona Corporation Commission executive secretary Jack Rose has "felt deeply ashamed and unhappy about my family and about who I was."

His Ivy League banter implies that he was born into a patrician world, but Rose grew up dirt poor in Mohave Valley, a small Arizona town that rests just south of Bullhead City on the Colorado River. He was the youngest of eight kids who lived in a single-wide trailer with their Seventh Day Adventist mother, a conservative woman who cleaned houses for a living. To escape his family, he spent his free time in the public library. He didn't get along with his blue-collar stepfather. Rose's real father split with his mother when he was a toddler, vanished entirely from their lives, and, Rose adds bitterly, "never paid child support."

Yet through his own grit, Jack Rose grew up to be the boy wonder of Mohave Valley, perhaps the only townie who has a law degree from Harvard and an undergraduate diploma from Yale.

But these days the Mohave Valley wunderkind is a disgraced ex-state official who, along with his devoted ex-boss, Corporation Commissioner Jim Irvin, is being investigated by the FBI. In a November 1999 search warrant, the FBI says it suspects both men committed mail and wire fraud in connection with a failed gas-company merger. The high-stakes $1.8 billion merger between an Oklahoma company, Oneok (pronounced wun-oak), and Las Vegas-based Southwest Gas would have created the largest gas company in the nation.

More important, if the merger had succeeded, it would have enriched Jack Rose, who had contracted to act more or less as an agent for Prudential Securities. Rose would have scored a hefty commission if Prudential had underwritten the merger.

Beyond the FBI criminal probe, the unfolding scandal has spawned several multimillion-dollar lawsuits, including a federal racketeering lawsuit in Phoenix that accuses Rose and Irvin of improperly lobbying and corrupting public officials to grease the Oneok-Southwest deal.

All of this happened after two years of Byzantine infighting at the Corporation Commission, where commissioners battled bitterly over how, exactly, to deregulate Arizona's electric companies.

Philosophical disagreements devolved into an acrimonious feud between Irvin and Commissioner Carl Kunasek, both Republicans. Which helps explain why, with Kunasek's blessing, Kunasek's aide Jerry Porter in May 1999 tipped a lobbyist about Irvin and Rose's irregular behavior in advocating for the merger. The lobbyist worked for Southern Union, a Texas-based company that also wanted to buy Southwest Gas but was spurned by the Southwest Gas board in favor of Oneok.

The Porter tip caused Southern Union to investigate the matter and ultimately file a fraud and racketeering lawsuit against Rose, Irvin, Oneok, Southwest Gas and a passel of its senior executives. The lawsuit, in turn, triggered the ongoing FBI criminal investigation.

Nobody has been charged with any crime yet. But if the FBI's suspicions are ever proved in criminal court, Rose and Irvin could wind up in prison.

Irvin, who has asserted in court that he did nothing illegal, refused several requests for an interview.

But in a July 1999 press release, issued after Southern Union filed its lawsuit, Irvin said the "false allegations" were based on "unsupported mudslinging."

"I categorically deny each and every civil and criminal allegation.... It's no secret that I have political enemies within this commission who will take any opportunity to drag my good name and good reputation through mud, but their attempt to discredit me and shift my focus from important consumer issues in electric and telecommunication deregulation will be unsuccessful."

Rose says again and again during a lengthy interview that he has done nothing wrong. He likens himself to a squashed bug.

"This has been the worst year of my life," says Rose.

"This has wrecked my career."

The story of Jack Rose's Icarian nose dive from apple-cheeked Yalie to accused racketeer can only begin with his own account of his flight from Mohave Valley.

When he was 13, he says, he escaped his lousy family life by enrolling in various Seventh Day Adventist boarding schools. Before graduating from Scottsdale's Thunderbird Academy in 1981, he says, he scored a 1510 on his Scholastic Aptitude Test, noting that "in today's scoring that would be [a perfect] 1600."

Even though his family did not value a college education, he says, he was determined to attend an Ivy League university: "I was very focused on getting out of Mohave Valley, getting out of the single-wide trailer on a dirt road."

So he took a post-high school year at an upscale boarding school in the East, where he acquired the necessary credits ("I was in the top 1 percent of every class") to apply to the best schools. His acknowledged embarrassment over his Mohave Valley roots must have pained him when he attended Haverford College, an elitist Pennsylvania school. To make ends meet at Haverford, he says, he got grants and student loans, worked in the library and also on construction jobs.

In 1985, after two years at Haverford (Yale would come later), Rose returned to Mohave County, where he successfully ran for county supervisor. He was 21. His résumé says he was "the youngest county supervisor ever to be elected in the nation." Press clippings indicate that Supervisor Rose supported a developer's ill-fated but grandiose plan to build a $40 million resort billed as the world's first scientific Disneyland (funded by county bonds).

While a supervisor, Rose, then a Democrat, campaigned for Renz Jennings, a fellow Democrat who was elected to the Arizona Corporation Commission.

Also during those busy years, Rose claims in his résumé, he became a real estate consultant and developer who "structured and brokered very complex real estate transactions ... invested as principal in numerous transactions."

After his supervisor term ended in 1989, Rose attended Yale and graduated cum laude in 1991. During his Yale years, he became a "mortgage trader and investor."

He made enough money, he says, to buy his mother "a nice house, the nicest place she's ever lived," in Golden Shores, a community on the Colorado River. She is 78 now, still lives in the same house. Rose says he talks to her several times a week. He says he's also helped other relatives with finances, including his sister's kids.

In 1990, while still a Yale student, Rose volunteered for then-Phoenix mayor Paul Johnson as a "loaned executive" -- a term that would later cause Rose's political enemies to snort: "He's an executive? What company loaned him?" Although Rose was an unpaid volunteer in Johnson's office, his title gave him access to Phoenix power brokers. According to Rose's résumé, his stint at the City of Phoenix included "transitional work with the business community" and advising the mayor on personnel appointments, city policy and political strategy.

"I wasn't an employee. I did it for free. I have done this consistently throughout my career," says Rose, claiming he had stashed away enough money from his real estate ventures and consulting work to afford to volunteer.

Jack Rose and Paul Johnson had a lot in common. They were both young -- at 30, Johnson claimed he was the youngest mayor in Phoenix history -- and they were both ambitious. Johnson went on to run for governor twice, lose twice, and own a telecommunications company. Today, Johnson stands by Rose, saying his friend is "honest" and the victim of a political smear. "The brightest guy I ever met," Johnson says.

After his loaned executive tenure with Johnson, Rose went on to Harvard Law School, graduating in 1996. While still in school, he ran for and was elected to the Maricopa County Charter Committee, which met in Phoenix to restructure county government via a new charter. (The charter was defeated by the voters in 1996.) While on the charter committee, Rose says he clashed with Andy Kunasek, now a Maricopa County Supervisor.

Andy Kunasek, who would not comment for this story, is the son of Corporation Commissioner Carl Kunasek. Andy is also a friend and former roommate of Carl Kunasek's devoted aide, Jerry Porter.

Porter is a lawyer with an MBA. Like Carl Kunasek, Porter is a Nebraskan. He shares his boss's conservative ideology. Once an aide to former governor J. Fife Symington III, Porter is an intense guy, so addicted to politics that his television set is fixed on the C-SPAN channel. In his spare time, he paints apartments. He owns several Valley apartment buildings, one in partnership with Andy Kunasek.

Jerry Porter is Jack Rose's nemesis, every bit as smart and ambitious and wily as Rose himself. Porter says the Irvin/Rose debacle has an element of "fun" to it, for him, and he will happily spin a reporter on the details of the scandal.

But even today, Rose can't see that he and Irvin handed Porter the rope that was ultimately used to string them up.

As a Harvard law graduate, Rose says, he could have "gotten a job at any company in the country, which in retrospect seems like a better decision."

But instead of choosing to work at, say, Sullivan and Cromwell, Jack Rose ended up at the Arizona Corporation Commission. His detractors say he joined the agency so he could network for future business deals; his supporters say he brought impassioned and brilliant perspective to utility regulation.

Among other things, the Corporation Commission regulates telephone, gas, electric and some water companies. With its soporific rate-case hearings, the commission may seem like the most boring agency in Arizona, but it's actually one of the public bodies that most directly affects our lives -- the three elected commissioners set the rates we pay to utilities. And in the past five years, commissioners have tackled deregulation of electric companies. The idea is to break up monopoly electric companies, like Arizona Public Service Company, and open the market for competition.

All of this explains in part why Carl Kunasek supported fellow Republican Jim Irvin when he ran for the commission in 1996. The seat Irvin sought was being vacated by Democratic Commissioner Marcia Weeks, who stepped down because of term limits.

Kunasek had been the sole Republican on the commission for two years. With another Republican on board, the GOP would outnumber the sole remaining Democrat, Commissioner Renz Jennings, at a time when critical deregulation rules were to be finalized.

Kunasek, 67, is a retired East Valley pharmacist. His conservative Republican politics are a reflection of his heartland roots -- he grew up in Nebraska. He was too young to fight in World War II and too old to fight in Korea, but he served three years in the Air Force anyway.

Currently the commission chairman, Kunasek has long soldiered for his party. He spent 16 years in the Arizona House and Senate. As president of the Senate, where he ruled as an iron-fisted patriarch, he was known as a stubborn guy whose face flushed the color of a beefsteak tomato when he was provoked. As Senate president, Kunasek presided over impeachment proceedings of former governor Evan Mecham. He split his vote -- voting for one count of impeachment and against another. After Mecham's ouster, Kunasek's constituency in the pro-Mecham East Valley blamed Kunasek, as Senate president, for letting the impeachment proceedings go forward in the first place. They did not reelect Kunasek.

In the early 1990s, Kunasek was appointed to a federal political post, overseeing the Navajo-Hopi land fracas. His old pal, Supreme Court Justice Sandra Day O'Connor, swore him in. In his office at the commission, Kunasek has a framed photograph of the swearing-in ceremony. He looks wistfully at the snapshot and says that, all things considered, he probably should have kept his federal job.

But he gave up the post to run for the Corporation Commission.

Kunasek allows that perhaps he should have known he would have trouble with Jim Irvin. In retrospect, he says, Irvin seemed a little odd.

Irvin was boisterous and offbeat and told inappropriate and insulting jokes, but he was the only Republican who sought the seat, and Kunasek felt a duty to help elect him. He figured Irvin would fall into place and toe the Republican line.

Insiders of both political persuasions describe Irvin as "a doofus." The scion of a successful California security-business family, Irvin volunteers as a reserve Maricopa County sheriff's deputy. He has posed for newspaper pictures in his uniform.

Irvin is fiercely loyal to his friends. For instance, he once suggested over golf that Southwest Gas board member Leonard Judd nominate Irvin's buddy, Gary Goodman, to the Southwest board. Judd later testified he found Irvin's behavior "improper." After all, as a Corporation Commissioner, Irvin regulated Southwest Gas. He had no business meddling with its board. And Irvin also regulated Goodman's Bermuda Water Company. (Just last summer, Irvin also tried to amend a hearing officer's estimate of the value of Goodman's company. A higher value would have meant that Goodman could sell his company for more money, but Irvin's amendment failed.)

Irvin first injected himself into Arizona politics by squandering $300,000 of his own money in the 1994 Secretary of State primary race. Jane Dee Hull won.

In 1996, Irvin ran for a seat on the Arizona Corporation Commission.

Kunasek and Porter were so eager to get Irvin elected they even accepted Jack Rose's offer to help with the campaign. (By then, Rose had become a Republican.) Yet Kunasek and Porter were wary. Rose had switched parties, and they wondered if his philosophical change of heart was genuine. Also, Andy Kunasek had clashed with Rose over the county charter.

Rose says he suggested Irvin's campaign could be bolstered with radio spots. The ads, written by Porter, were based on the Republican contention that the Democrat-controlled board had kept the rates of small water companies artificially low, which kept those companies from investing in safeguards to keep the water safe. Jennings says the message was that Democrats made water unsafe to drink.

"It was stupid and dishonest," says Jennings.

While working on the Irvin campaign, Rose also set up the Ivy Group, which he said at the time was an educational consulting service. But he lost interest in the Ivy Group after Jim Irvin was sworn into office.

The circumstances surrounding Irvin's oath-of-office ceremony were the first real sign that Irvin might be a problem for Kunasek. Irvin requested a fancy swearing-in ceremony. Kunasek was well-connected, so his aides planned a gala and invited a slew of Republican dignitaries. Yet after requesting a big bash, Irvin was outraged by the planned event.

No one could figure out why.

In fact, no one seemed to be able to figure out Irvin at all.

No one, perhaps, except for Jack Rose.

In the spring of 1997, just a few months after he moved into his office at 1200 West Washington, Irvin announced that he was starting a "loaned executive" program and that his first loaned executive would be Jack Rose, who would serve from six months to a year, gratis. Rose even signed a pledge saying, among other things, he would not promote his own interests.

The announcement of Rose's appointment was not received warmly at the commission. As Irvin's "loaned executive," Rose began attending deregulation meetings with senior utility executives, began insinuating himself into sensitive projects normally reserved for staffers.

Rose's presence upset Jennings, who thought it improper for Rose to be so intimately involved with state business. But Rose wrote Jennings a memo asserting his motives were pure; he had no conflict of interest, he simply wanted to advise Irvin on regulatory matters. The Rose memo mollified Jennings. He backed off. After all, he had more pressing political problems. As the sole Democrat, Jennings, who'd been a commissioner for 12 years, was suddenly outgunned by two Republicans he did not particularly admire. He disliked Irvin because of the unsafe-water radio spots. And he found Kunasek dictatorial and destructive to the commission he'd tried to build for 12 years.

But Kunasek was also upset by Irvin's loaned executive.

Irvin, now 46, chafed at being Kunasek's junior partner. Kunasek, then chairman of the commission, was having his own set of problems with Irvin, who would not follow Kunasek's lead on business -- including electric company deregulation.

"Many times I wondered what I did to make Jim Irvin dislike me," says Kunasek.

"Jim had never had a lot of independence [from his family and his father], and I wonder if he was trying to exercise his authority for the first time.... I wonder if I reminded Jim of his father," he says.

Irvin is "all about ego," says Jennings. "He's got a very wealthy father and grandfather, and I got the feeling he had the rug pulled out from under him emotionally and he doesn't come from a totally smooth functioning family."

One commission insider recalls that Irvin referred to Kunasek as "'shit for brains' and 'Mr. Crazy.' One would say: 'You're a liar!' and the other would say: 'No, you're a liar!'"

As chief mandarins, Rose and Porter also grew increasingly antagonistic.

Then Jennings plunged into the maelstrom. To regain his lost power during his last year in office, a year in which electric company deregulation rules would be written and finalized, Jennings aligned himself with Irvin against Kunasek. And he supported a move to fire the commission's executive secretary, Geoffrey Gonsher, Kunasek's hire, and replace him with Jack Rose.

Jennings now says he supported Rose for the job because Kunasek wanted to bring in Porter's friend, former Symington aide Jay Heiler, for the post. Democrat Jennings feared Kunasek would "Symingtonize" the commission, "stack it with a bunch of cronies."

In response to the Rose hire, Kunasek resigned as chairman. Irvin replaced Kunasek. Throughout 1997 and 1998, as deadlines for deregulation rules approached, the commission churned. Animosity among the three commissioners was manifest in seemingly endless, ugly scraps over whose favorite staffer would get fired and whose favorite candidate would get hired. There were fights over salaries. There were accusations of rules violations and state laws broken. There were fights over how many hours aides worked. And the fights were memorialized in letters that shot back and forth between commissioners like spitballs. Some samples:

October 27, 1997. Kunasek to Irvin: "It occurs to me that it may be difficult for a person of your means to understand that many people in this agency work not only because they want to but because they must...."

November 23, 1997. Kunasek to Irvin: "I remain very concerned that this commission's Executive Secretary, Jack Rose, continues to insert himself in areas that are not appropriate for this agency's Executive Secretary.... Given his record this commission has no choice but to relieve Mr. Rose of his duties before further embarrassment befalls Mr. Rose or this agency."

June 23, 1998. Rose to Irvin, Jennings, Kunasek: "... Commissioner Kunasek and Jerry Porter have made over 200 accusations of illegal and improper conduct.... Most of those accusations have been so clearly frivolous or so obviously political that it has been unnecessary to waste taxpayer resources to rebut the accusations."

October 16, 1998. Jennings to Kunasek: "What happened to you? You used to be a civil and measured fellow. You have become the most accusatory person I have ever known in government.... Don't you see in any of your own behavior why it has been difficult for Jim Irvin to get along with you?"

October 30, 1998. Kunasek to Jennings: "Your neverending partisan theatrics has now severely destroyed any shred of truth and dignity that may have once existed in your office."

November 2, 1998. Porter to Jennings: "... the campaigns you have conducted for this office have been despicable."

December 31, 1998. Jennings to Porter: "... Liddy-like, you create phony crises to solve.... You know what you are doing. You are a smear artist."

To this day, each side blames the other for fanning the strife. Irvin was "goofy," says one Kunasek loyalist, but Jennings, "basically an honest individual," aligned himself with Irvin, whom "he knew to be nutty" and thus enabled the hiring of "slippery" Rose.

When Rose came on as executive secretary, he hung his framed diplomas on the wall. In an introductory letter to the agency's 270 or so staffers, Rose said: "I have a very strong interest in utility regulation dating back to my years on the Mohave County Board of Supervisors.... I will be sending you a follow-up memorandum discussing my economic and regulatory policy."

Rose did not just administer the commission, which is what executive secretaries normally do. Instead, he added "chief executive officer" to his job title, a move he now concedes was "a bit pretentious." He also made key policy decisions.

"Why shouldn't I go into policy issues?" Rose asks.

For instance, he negotiated a settlement over a lawsuit with US West. And he was a key player in deregulation talks. Rose admits he "made a mistake" when he hired Morris Wolff as utilities director. Wolff was forced out after Porter discovered that Wolff had lied on his résumé.

In November 1998, after former state treasurer Tony West narrowly won the seat soon to be vacated by Jennings (because of term limits), Irvin, Jennings and Rose scrambled to push through a precedent-setting deregulation settlement agreement with Arizona Public Service Company while they still held a majority.

Kunasek opposed the settlement agreement, perhaps hoping to stall until West, an old colleague from the Legislature, came on board. Then West and Kunasek could outvote Irvin and push through different rules. Kunasek and his aide informed the Arizona Attorney General's Office about the mad -- and allegedly illegal -- rush to get the deregulation rules in place by December 31, 1998. The Jennings-Irvin-Rose plan was dashed when Supreme Court Judge Charles Jones ruled that the commission, in its rush, had failed to give interested parties "due process" -- sufficient time to comment on the rules.

Eventually, Kunasek would take the lead in writing a different set of deregulation rules.

In a nutshell, the first deregulation plan gave ratepayers a 4 percent reduction and required that electric companies commit to solar resources and to sell off either their power plants or their transmission systems. The second plan offered consumers a rate break of 7.5 percent but did not require electric companies to sell off power plants or transmission systems.

Although electric company deregulation is only just beginning -- APS won't be fully deregulated for a couple of years -- each side contends today that its rules are/were more "consumer friendly." Since the deregulation process is so painfully slow, we won't know for years whether the commission has set up rules that will provide consumers with a reasonable choice of electric companies.

Not surprisingly, Rose says Kunasek caved in to the utilities and wrote rules that will preserve their monopolies.

"Tony and Carl passed a lame set of rules; they pretended they got more money for people, but in fact they eliminated competition," says Rose. "They totally reversed everything I had worked on and gave utilities exactly what they wanted."

Jack Rose must have wondered what to do when he stepped down as the Corporation Commission's executive secretary/chief executive officer at the end of 1998. As usual, he set his sights high. No single-wides on a dirt road for Jack Rose.

On December 14, 1998, just two weeks before Rose was to resign, Oneok and Southwest Gas announced a proposed merger. The Arizona Corporation Commission and their regulatory counterparts in Nevada and California would have to approve the merger.

That same day, Rose faxed his résumé to Prudential Securities in New York. (Rose used the commission's fax machine.) He had visited Prudential officials earlier in the fall to discuss the possibility of the company floating bonds for deregulated power companies in Arizona. Kunasek suspects that earlier visit included a job hunt, an allegation Rose denies.

One week later, on December 21, 1998, Rose faxed a "business proposal" to Prudential. Once again, he used the commission's fax machine. The proposal detailed Rose's ambitions to become an investment banker after he left the agency on December 31. He explained how his "insider" status as a former commission staffer could help Prudential.

"As a former commission staff director who has networked aggressively over the past few years, I am in an ideal position to get the initial advisory contracts, add value to state proceedings and obtain the resulting underwriting business.... Like any other business, insiders always have an advantage," he wrote.

Among other possible projects, he wrote about the proposed Southwest merger:

"Last week Southwest Gas Corporation announced that it is being bought out in an all cash transaction. Given my relationship with this company and my ability to advise them on important regulatory issues related to the merger, I believe that I am well positioned to get some of the underwriting business."

"I should have a job title that is sufficiently prestigious to enable me to work directly with CEO's and impress state commissions," he wrote.

He even proposed a two-year contract, adding: "If I have not brought in at least one six-figure ... contract within six months, Prudential has the right to cancel the contract."

"The downside is minimal and the upside is dramatic," Rose concluded. "I hope you will reach the conclusion that this proposed relationship has a positive expected value."

Two weeks later, Rose left the commission.

Renz Jennings retreated to his south Phoenix farm, where he tried to put the last bilious months he spent at his beloved commission behind him.

Tony West replaced Jennings. West, a former state treasurer and senator, had narrowly won the election against Paul Newman, a legislator from Bisbee. West's political life had been a progression of acts that, if not technically improper, certainly had the appearance of impropriety. For instance, while a state senator, West also served as a salesman for a controversial syndicator who lost a lot of people's money. West was stung by public reaction to his "double dipping" -- taking advantage of a loophole in the law that allowed him to resign for one day as treasurer, begin collecting retirement from his Legislature days, then step up again as treasurer so he could collect salary and retirement at the same time.

"I gotta put food on the table," West would say to explain his tactics.

West was forced to resign from the commission in June 1999 because he illegally held a securities license. Commissioners are not allowed to hold securities licenses because they regulate securities. (Governor Jane Hull replaced West with Bill Mundell, a moderate Republican attorney and former state senator who is said to have a calming influence on the warring Kunasek and Irvin.)

But before West was kicked out of office, embarrassing details about Jack Rose and Jim Irvin were beginning to surface.

In early January 1999, executives from Oneok traveled to Phoenix to cozy up to commissioners. Because Southwest Gas serves Arizona, it would be necessary to get the Arizona Corporation Commission's approval for the merger.

The officials met West and Kunasek at the commission office. But Irvin insisted on a lunch meeting at the Arizona Country Club. The executives claim they were surprised that the lunch was also attended by Jack Rose. Irvin announced that on matters relating to the merger, they could "go through" Jack Rose. Rose was more or less a "loaned executive" again, and he had entree into Oneok's offices.

Kunasek and West knew Rose was Irvin's point man on the merger as early as February 1999. Later, Kunasek would be blamed for sitting on the scandal for his own political advantage. Oneok officials, for instance, question why Kunasek did not warn them of his suspicions about Rose early on. To Kunasek's credit, he kept his mouth shut because there was really nothing illegal about Rose acting as Irvin's unofficial adviser. At the time, Kunasek didn't know about Rose's financial arrangement with Prudential.

Kunasek knew the merger was high-stakes: The company that acquired Southwest Gas would be the largest gas company in the United States. Southwest Gas had 1.2 million customers in mushrooming Arizona and Nevada.

Oneok offered to buy Southwest Gas at $28.50 per share. Southern Union, which had been wooing Southwest for months, announced that it would pay about $100 million more than Oneok -- about $32 per share -- for Southwest Gas. The Southwest Gas Board of Directors planned to meet in early April 1999 to consider which offer to accept.

Southern Union claims that prior to the key meeting, Rose and Irvin lobbied out-of-state regulators to favor Oneok over Southern Union. Rose and Irvin wanted to persuade the regulators to sign a letter addressed to the Southwest Board allegedly hinting that powerful commissioners from three states favored the Oneok deal, and that Southern Union would have a tough time getting regulatory approval for the merger.

Oneok hired two Arizona lawyers to assist with the potential merger: Michael Grant, a seasoned attorney with a sterling reputation who often appeared before the commission, and Mark Dioguardi, who sources say is a friend and associate of Jack Rose. Grant got the standard job -- working with commissioners and filing the necessary papers; and Dioguardi edited letters.

Those letters ultimately would be used by Southern Union to allege a pattern of racketeering, fraud and improper lobbying by Rose, Irvin and executives from Oneok and Southwest Gas.

No evidence has surfaced that suggests that Irvin stood to profit from the deal. And since Irvin isn't talking, except to profess his innocence through his attorney, we don't know what motivated him to get involved in the alleged scheme. Was he simply supporting his friend, Jack Rose? Did he know that Rose stood to profit from the deal? If Irvin knew about Rose's contract with Prudential, did he expose himself to criminal liability by joining Rose to lobby regulators? Or did he sincerely believe that Oneok was the superior suitor?

Rose knows all the answers, but he won't respond to specific questions about the case.

So the story of what happened next is unfolding in federal court.

On March 2, 1999, Oneok and Southwest formally filed papers asking the Arizona Corporation Commission to approve the merger.

On March 16, Rose and Irvin visited San Francisco with a draft letter to the Southwest Board. They wanted California regulators to sign the pro-Oneok letter.

The trip was a secret one. The day that Irvin and Rose visited San Francisco, Irvin's official calendar said he was at his commission office. And Irvin uncharacteristically failed to seek commission reimbursement for expenses. Months later, Irvin told the Wall Street Journal that Rose just "happened" to be in San Francisco, so he invited Rose along to his meeting with California regulators. But America West Airlines records show the two traveled from Phoenix on the same plane and sat in the same row.

Southern Union would later charge that the letter Irvin delivered to the California regulators, a letter that had been reviewed by Dioguardi and Oneok attorneys, was "false and fraudulent," that Rose and Irvin had corrupted the regulatory process against Southern Union to favor Oneok. The spin that Rose and Irvin allegedly employed was that Oneok was financially stronger than Southern Union, and would have fewer obstacles to getting regulatory approval.

But the San Francisco trip failed. Even after Irvin made a follow-up phone call, California officials ultimately chose not to sign the letter, fearing impropriety.

Three days later, on March 19, Rose signed an agreement with Prudential. If Prudential obtained securities business from the Oneok merger, Rose would get up to 35 percent of Prudential's management fees, which, according to Southern Union, could total millions of dollars. (The contract also suggests Rose planned to mine US West for potential Prudential deals.)

There is some question about whether Oneok officials lied to commissioners about whether they knew of the Rose-Prudential contract early on. Oneok officials testified that they learned about Rose's contract with Prudential in July 1999. Yet months before, Rose attended a Prudential-Oneok meeting where he was introduced as a Prudential "consultant." The testimony of the Oneok senior official who allegedly knew early in the game about Rose's deal with Prudential has yet to be made public.

In a letter to the Corporation Commission, Oneok said it "firmly believes that none of its actions were wrongful." The company also says it did not agree to give Prudential any business based on what Rose did or didn't do.

Several days after Rose cut the deal with Prudential, he and Irvin flew to Reno to persuade Nevada regulators to sign the pro-Oneok letter.

Susan Sheldrew, a Nevada commissioner, later testified: "Mr. Irvin said that the way that the letter was written, it was designed -- it was designed to point to [favor] Oneok but that we couldn't say so in so many words because that would be improper.... I believe the letter was intended to be positive for Oneok."

Sheldrew found the letter improper and refused to sign it.

Irvin and Rose next met with Nevada Governor Kenny Guinn, the former president of Southwest Gas. Because of his former position, Southern Union contends, Guinn would have a conflict of interest if he acted to influence the merger.

Guinn's assistant, Pete Ernaut, recalled in an affidavit that at the meeting, "Rose represented Oneok." Ernaut sat in on the meeting for just a few minutes, and testified that "there was no lobbying."

But Jim Fisher, a longtime commission staffer and former aide to Tony West, suggested in an affidavit that Rose and Irvin lobbied the governor.

Michael Maffie, the Southwest Gas CEO, allegedly told Fisher "... that he got the [Irvin-Rose] draft letter from the Governor of Nevada ... that he received a telephone call from Governor Guinn in March 1999 during which the Governor said that Commissioner Irvin ... and Jack Rose had met with the Governor to seek his support to have the draft letter approved by the Nevada Public Utilities."

In the end, of all the regulators in Arizona, California and Nevada, only Jim Irvin sent a letter (on Arizona Corporation Commission letterhead) to the Southwest Board.

Irvin's April 5, 1999, letter hints that Southern Union might not get regulatory approval from the three states.

Irvin did not stop with the letter. Right before the Southwest Board meeting, he phoned the Southwest Gas president.

You'd think that once the Oneok-Southwest merger was cinched, things would have gotten easier for Jack Rose. But he couldn't make any Oneok-Prudential deals come together. And Kunasek and Porter were breathing down his neck.

His tailspin began when Prudential got suspicious of just how much help Rose could really offer. Prudential wasn't getting the goods Rose had promised to deliver. Joe Fischera, a high ranking investment banker at Prudential, wrote in a May 24, 1999, e-mail to a colleague that l'affaire Rose was "beginning to gather a stench of hucksterism."

Also in May, after Southern Union had withdrawn its offer to buy Southwest Gas, Jerry Porter contacted Southern Union's lobbyist. He says he told him about the Rose-Irvin trips to California and Nevada. His rationale: The commission could not afford to investigate either Rose or Irvin, but Southern Union's lawyers could.

Rose refined his contract with Prudential in June 1999. Again, it appears from the second contract that Rose stood to reap at least $2 million from any merger-related deals Rose brokered for Prudential. But a source close to the Rose case maintains that unwritten conditions attached to the contract would have made it difficult for Rose to get a single dime.

In July, just two days before the Arizona Corporation Commission was to consider approving the Oneok-Southwest Gas merger, Southern Union filed its lawsuit. It alleged that Irvin, Rose, Oneok, Southwest Gas and various executives committed fraud -- the letters, the lobbying -- to nix the perfectly good Southern Union-Southwest Gas merger.

In November, the FBI raided Jack Rose's apartment. The search warrant says Rose and Irvin are suspected to have committed mail and wire fraud in connection with Oneok and Southwest Gas.

In January, Southwest Gas turned around and filed its own federal lawsuit against Oneok and Southern Union. Southwest Gas contends that Oneok and Rose and Irvin "knowingly engaged in improper conduct intended to increase the chance that Southwest would reject Southern Union's offer and accept Oneok's."

Southwest Gas contends in court it was in the dark about Oneok's machinations. "If Oneok had disclosed its improper role in the lobbying efforts by Rose and Irvin ... and the Oneok Rose Prudential relationship, it would have caused the Board to have serious questions about the integrity of Oneok's senior management ... and about Oneok's chances of obtaining regulatory approval...."

On January 4, Deborah Scott, the Arizona Corporation Commission's utility director, testified that the staff recommended that the commission not approve the merger, in part because it doubted "Oneok's truthfulness and ability to identify inappropriate conduct and apparent conflicts of interest."

Oneok withdrew its merger application in January.

Commissioners opened a new case, or docket, that will enable them to look into the companies involved in the Southwest-Oneok merger.

Carl Kunasek reigns as chairman of the Arizona Corporation Commission.

His aide, Jerry Porter, still watches C-SPAN.

Jim Irvin is still an active commissioner. He still will not talk to Carl Kunasek. Two weeks ago, commission staffers saw Irvin duck into a couple of offices, then sneak into the elevator to dodge a process server.

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Times are tough for Jack Rose. The wunderkind from Mohave Valley does not have a full-time job. Although he says he does occasional legal work, it has been necessary to cash in his retirement to pay his defense lawyers.